How Universities and Charter Schools Prepare for Audits
Auditing is the process of reviewing an organization’s financial records to decide if they are accurate and align with regulations, state laws, and accounting standards. For charter schools, it can be tricky to prepare for audits. They’re usually performed by third-party auditors or by an auditing firm, and they scrutinize a school’s financial record keeping.
Internal auditors examine an organization’s business practice and risks and audits are conducted throughout the year.
External auditors examine an organization’s accounting records and financial information to issue an assessment in the form of an audit report on the financial statements of the organization. External auditors conduct annual audits to make sure they fit auditing standards.
To prepare for a successful audit, you must have sufficient internal controls in place. An auditor will follow set procedures, which will follow GAAS (generally accepted auditing standards) or other international standards on auditing.
Publicly traded companies are also required to follow PCAOB standards, which is a regulatory board reporting to the SEC who oversees the audits of public companies.
A typical audit process
Step 1: Submit an order
First, to purchase an order, schools will need an order justification form and reason on how it is an educational purchase by American state law. Once the order has been approved by the appropriate individuals, it will move into the next stage: purchasing.
The purchasing manager is responsible for sourcing items and evaluating vendors based on their delivery speed, pricing, and quality.
Step 2: Purchasing
Once purchased, the purchase order becomes another documentation. Depending on where your Charter School is, procurement laws may be different. In the United States within the state of Texas, Procurement Managers are a legal requirement. Any purchase requires a tracker. At any given time, they can be audited and may need to produce where those items are. For example, if they order a laptop, it will need to be tracked and traceable.
This information should be in a centralized place – it could be an excel sheet, a purchasing software, a ticketing software, anything that works for you and your organization. Be sure to let your team know the importance of tracking the information and how. Empower your procurement manager to hold others accountable for providing the needed documentation.This helps save time when you’re going through the auditing process. If your procurement law doesn’t require a Procurement Manager, an administrator would be the one who creates the purchase order and checks if the proper documentation is attached.
Step 3: Receiving
There can be multiple people receiving items. This includes administrators, receptionists, purchasers, and teachers.
With so many people involved, it’s easy to lose items and packing slips, which lengthens your audit. By selecting one individual responsible for each task, there will be less back and forth. For example, communication will be a lot easier if there’s a designated person receiving all incoming packages. That person is accountable to tracking and delivering.
The packing slip and invoice would be attached together such as the time that it was created and the time that it was received. The accounts payable team process the invoices and keeping a paper trail of checks, payment method, and who signed off on the invoice. The invoice is the final piece of documentation needed to complete the financial audit.
How to make auditing easy for your school
In Arizona, auditors may ask for ~150 orders per school. They may require order forms, invoices, purchase orders, cost statements, and packing slips. By manually organizing, picking, and compiling all of the documentation in an internal audit, it could take days, weeks, or even longer.
Usual auditing documents needed:
- Order and the order justification form
- Purchase order
- Packing slip
Although paper tracking is very common among charter schools, there are charter schools who are adapting to use information technology or software tools to track documents and business activities digitally, including online bookkeeping or spend management.
Traditional paper tracking is manual, tedious, and time-consuming. Finding documents for each order is tiresome work and documents can be misplaced. The lack of visibility into documents has a knock-on effect on the auditing process, too.
Technology centralizes your document storage, reducing your auditing timeline from weeks to days. In fact, with a tool like Procurify, auditors can view documents from one cloud-friendly place.
“Procurify keeps me organized and on top of purchasing requests. I don’t need to hunt down paper POs and emails with requests, it’s all in one place. It provides an easy-to-use interface for people to enter exactly what they want. This makes it significantly easier from a purchasing and budgeting standpoint to approve requests and process them.” – Excel Public Charter School
It’s okay if your organization is not yet ready to implement an entire system. But, a good place to start is to ensure all data is reflected in one place.
Want to find out more?
If you’d like to learn more about the auditing process, learn how our education customers reduced their purchasing timeline by 80 percent using Procurify.